Who wins when Ma Bell hangs up?

Published 4:00 am, Wednesday, February 2, 2005

ONE OF THE MOSSY titans of American business has toppled, folded into a former subsidiary at a discount price. The merger of AT&T into SBC underscores the rapid, unpredictable pace of change in the communications industry.

Even after the phone colossus was broken up by court decree in 1984, AT&T remained a giant, poised to rule long-distance service and big business. But a flood of new options destroyed this tidy business model. Cable, satellite, cell phones and Internet services have all bitten off pieces of the telecom market while the regional Bells such as SBC grew.

The market is spreading out in uncharted ways. By gobbling up AT&T, SBC picks up the aging player's customers and solidifies the regional firm's dominance in California. The older image of Ma Bell has changed to the bland- but-big SBC.

Regulators must decide whether this new super-Bell will smother competition or bring innovation, convenience and lower prices. Among the first effects: SBC indicated Tuesday it will cut 13,000 jobs as the merger proceeds. Crystal-ball gazers, please forward your predictions to the California Public Utilities Commission or the U.S. Justice Department.

As AT&T found out, the past is no guarantee of the future. Just because the company pioneered the telephone, built a national monopoly and spawned deep-science research at its Bell Labs, that doesn't mean its success is assured. The telecom market has no room for nostalgia.

From a million employees a generation ago, it has shrunk to 47,000. Its stock, once the original widows-and-orphans safe buy and thus the most widely held issue, is today a certified dog by most measures. Until a deal was closed this week, AT&T basically has been for sale for several years.

The firm dabbled in all the right places -- cell phones, computers, and cable -- with little to show for its efforts. It poured $100 billion into buying cable systems, but bailed out several years later because it couldn't sustain the crushing debt load. Other companies, such as SBC, did these businesses better. The $14 billion price isn't particularly huge, given other mergers this month.

Nationally, SBC becomes a bigger player in telecom battles. In California, this prominence is especially strong. It has 90 percent of the residential land-line market, a level which consumer advocates fear will harm competition and low prices.

But other trends work against this bleak picture as customers consider dumping their copper-wire phones for cell handsets. Also, cable companies and Internet providers are getting into the phone game. Dismantling the original AT&T widened the marketplace, allowing new ways to communicate to take root.

If the merger works, SBC could capitalize by bringing customers the full package: data, voice and pictures. But it could also bungle the job as AT&T did and risk a consumer rebellion.

State utility regulators need to get the rules right to make sure California's businesses and consumers win out. Open access, clear operating guidelines and fair treatment for customers must be maintained as SBC grows.